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A Matter of Minutes: Unexpected FOMC Communication and Fed Credibility

Author

Listed:
  • Venade João

    (School of Economics and Management, 26706 University of Porto , Porto, Portugal)

  • Grilo Filipe

    (Porto Business School, 26706 CEF.UP, CEAD, University of Porto , Matosinhos, Portugal)

Abstract

Unexpected revelations in the Federal Open Market Committee (FOMC) meeting minutes may provide critical information and hinder the Federal Reserve’s (Fed) credibility. Our analysis explores the impact of unanticipated content on FOMC policy discussions, revealing that more-hawkish-than-expected minutes reduce daily stock market returns by raising the risk premium. We also find a non-linear relationship between the unexpected minutes’ sentiment and the Fed’s credibility: surprise hawkish revelations can worsen credibility, with larger deviations further de-anchoring long-term inflation expectations from the 2 % target. Our findings suggest that the Fed should continue refining its communication strategies to avoid the damage of unexpectedly hawkish minutes in its credibility.

Suggested Citation

  • Venade João & Grilo Filipe, 2025. "A Matter of Minutes: Unexpected FOMC Communication and Fed Credibility," The B.E. Journal of Macroeconomics, De Gruyter, vol. 25(1), pages 1-43.
    • Handle: RePEc:bpj:bejmac:v:25:y:2025:i:1:p:1-43:n:1008
    DOI: 10.1515/bejm-2024-0074
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    More about this item

    Keywords

    FOMC; meeting minutes; central bank communication; sentiment analysis; central bank credibility;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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